As the Pensacola City Council prepares to consider a property tax exemption for a $50 million project in the downtown core, questions have emerged about the exemption’s timing.
Quint and Rishy Studer are seeking the incentive for their planned redevelopment of the former Pensacola News Journal site, which the couple purchased in 2013. The much-anticipated project is expected to add more than 250 residential units in downtown Pensacola, along with retail space, offices, and a public/private parking garage.
The council voted last September to issue an Economic Development Ad Valorem Tax Exemption, or EDATE, to Daily Convo LLC, the Studer-owned company managing the redevelopment. EDATE incentives — which exempt a property owner from paying taxes on the value of improvements to a property — are typically used to help companies which are expanding and creating jobs. In the case of the Daily Convo project, the incentive could be worth between $2-3 million over ten years.
However, the council repealed the Daily Convo incentive earlier this year amid questions about the city’s handling of EDATE applications. While the council expressed its support of the project in a resolution, the Escambia County Property Appraiser’s office determined that the tax exemption should be applied for in the year it is intended to take effect. Because EDATEs provide a tax break on the value of property improvements, that’s typically the year in which the improvements would be completed. For the Daily Convo development, that’s 2017.
s. 196.1995, Florida Statutes, seems clear on that point:
Why then, is the issue coming back to the city council now?
Florida state law lays out the specific conditions under which cities and counties can grant EDATE incentives. Normally, companies are only eligible to receive the incentive if they’re a new or expanding businesses creating ten or more high-paying jobs in a targeted industry. The Daily Convo doesn’t meet those qualifications, a fact they essentially acknowledged in their original EDATE application, in which they asked that the target industry requirements be waived.
However, there’s another way that municipalities have been able to grant EDATEs, and it’s tucked away in s. 196.012(14)(b), Florida Statutes:
Established by the state in the early 1980s, the enterprise zone program allowed cities and counties to designate “economically distressed” areas which would be eligible for special incentives to encourage private investment. The City of Pensacola designated its enterprise zone in 2002, and it includes most of the western section of the city, including everything west of Tarragona Street.
So for businesses like Daily Convo which don’t meet the state’s targeted industry criteria, there’s been another way to apply for EDATE incentives, as long as the project in question is within the boundaries of an enterprise zone. In the case of the Daily Convo project, it’s literally on the border — the project site occupies a full city block bounded by bounded by Intendencia, Jefferson, Romana, and Tarragona streets.
Questions about tax exemption’s timing
If state rules say Daily Convo should be applying for an EDATE in 2017, why are they coming back to the city council with a new application now, before the project has even broken ground?
In short, it’s because Florida’s enterprise zones are going away. When legislators originally established enterprise zones, they included a sunset provision. The legislature voted in 2005 to extend the program for ten more years, but a similar vote didn’t come this year, and the enterprise zone statute will expire on December 31. With less than six weeks before the end of the year — and two readings necessary to approve such an incentive — this is the last opportunity for anyone hoping to get an EDATE using the enterprise zone criteria.
City spokesman Vernon Stewart confirmed that Mayor Hayward chose to call the special meeting now due to the expiration of enterprise zones at the end of the year, saying that Hayward “wants to be proactive and get readings and ordinance passed before 2016.”
A memorandum to the city council further details the issue:
City officials said Friday that the office of Property Appraiser Chris Jones has requested an opinion from the Florida Attorney General about the effect of the expiration of enterprise zones on the EDATE process. A response from the Attorney General “is expected to be forthcoming,” officials said.
“Economics simply do not work without EDATE”
It’s unclear how the project could be affected if the tax incentive isn’t awarded. Daily Convo’s original EDATE application, submitted in September 2014, noted, “economics simply do NOT work without EDATE.”
Studer has said in the past that the tax break was essential to making the overall financial numbers work and moving the project forward.
Representatives for the project had not responded to a request for comment before press time.
Hayward enthusiastic in support
Hayward, who has spoken in support of the incentive in the past, said Friday that he still strongly supports granting the EDATE incentive to the Daily Convo development. “I am excited about this project,” said Hayward. “The last five years we have had a goal to create more density downtown and this project is transformative and will help our small businesses in the urban core of our vibrant community.”
Hayward has called a special city council meeting to consider the incentive. That meeting is scheduled to take place immediately following the council’s meeting to select a new president and vice president, which will begin at 9:00 a.m. on Tuesday, November 24.